Phoenix Coyotes Declare Bankruptcy
The Phoenix Coyotes (the old Winnipeg Jets) have declared bankruptcy. From the Arizona Republic (HT Warren Meyer):
Less than an hour before the National Hockey League commissioner planned to broker a deal to sell the and strip team owner Jerry Moyes of his duties Tuesday, Moyes filed for bankruptcy to sell to his own buyer.
Moyes, as part of a Chapter 11 reorganization filing, agreed to sell the team for $212.5 million to a BlackBerry wireless magnate who plans to move the team to a yet-to-be determined location in southern Ontario, Canada.
The move is not a certainty. Already, the NHL and Glendale, which leases Jobing.com Arena to the Coyotes, have objected to Moyes’ tactics. And other investors could outbid BlackBerry executive Jim Balsillie’s PSE Sports & Entertainment LP.
But the Coyotes, who have played in metro Phoenix since 1996, habitually have lost money in the desert, first when they shared an arena with the Phoenix Suns in downtown Phoenix and most recently in Glendale.
Moyes, who since 2001 has invested more than $310 million in the team, declined to be interviewed. Earl Scudder, his financial and legal adviser, said Moyes had no option but to file for bankruptcy because that was the only way to void the team’s lease with Glendale.
“He didn’t have a lot of choices,” Scudder said. “He had gone through extensive marketing efforts and was unable to get offers for the team that would take care of the creditors.” The move shocked Glendale, which contributed $180 million for the $220 million arena that opened in 2003. For the city’s hefty investment, the team signed a 30-year agreement with an early-termination penalty of more than $700 million.
I agree with this assessment from Meyer:
Several years ago, Phoenix suburb Glendale paid about $180 million to build a hockey stadium for the Coyotes. The Coyotes had already been in the Valley for several years, losing money all the while, and had shed one ownership team for another fronted by Wayne Gretzky. It was shear madness to build them a stadium, as their chances of financial success were almost non-existant. It was already clear at this point that hockey was not going to be a big draw in Arizona. For this reason, Scottsdale and Phoenix both ended up passing on subsidizing the team before Glendale, out to prove it was a “real” city, stepped up to the plate with a wad of taxpayer money.
This is one of the problems with using other people’s money to finance risky projects: investors take risks that they otherwise would not. If the project doesn’t pan out, it’s the taxpayers who are on the hook.
Addendum: I see that Victor Matheson has posted on the bankruptcy as well. As I mentioned to him in an email, I think it’s pretty clear that the Coyotes are not in danger of completely folding. Instead it seems that the bankruptcy filing is strategic – a way for Moyes to at least buy himself a little more time in his attempt to sell the Coyotes to Balsillie.
Another addendum: according to this AP update, the NHL questions whether Moyes has the power to file for bankruptcy.
Another addendum: The Chicago Tribune reports that White Sox owner Jerry Reinsdorf is working with the NHL on a deal to buy the Coyotes and keep them in Glendale.